Rahul invested an equal sum of money at compound interest under two schemes A and B. Under scheme A, the interest rate was 10% per annum and under scheme B, the interest rate was 12% p.a. The compound interest after two years on the sum invested in scheme A was Rs 1,050. How much is the interest earned under scheme B after two years, if the interest is compounded annually in both schemes?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Rs 1,272
Let the principal be 'p'.
A = P(1 + r/100)n
For scheme A
A = P(1 + 10/100)2
A = 1.21P
1.21P - P = 1050
P = 1050/.21
P = 5000.
Interest earned of 5000 in scheme B.
A = 5000 × (1 + 12/100)2
A = 5000 × 1.2544
A = 6272
Interest earned on the same sum in scheme B = 6272 - 5000 = 1272.